BIRMINGHAM, England (Reuters) –
UK bank Lloyds' army of small investors grilled executives for over three hours on Thursday over secret central bank loans and mistakes made during the crisis, but agreed to back a record-breaking rights issue.
Britain's largest retail bank won the backing of virtually all its investors for a 13.5 billion pound ($22.5 billion) cash call, but had to defend itself against anger over billions of pounds in central bank support for HBOS, kept secret from shareholders at the time of its rescue by Lloyds (LLOY.L).
"They still argue the deal they did will add value, but to get back to the sort of returns that enabled the group to pay 30p a share in dividends is going to require a minor miracle," said Douglas Moffatt, a shareholder and retired journalist.
"This was an occasion to vent small shareholder spleen."
Lloyds said at a busy meeting of shareholders in the central England city of Birmingham that it had a "modest" exposure to Dubai World, the company at the center of worries about debt problems in Dubai, but said it did not represent a material threat. Lloyds and other European bank stocks were hit on Thursday by concerns about loan exposures.
Lloyds, 43 percent state-owned, said 99.75 percent of shareholders who voted approved the rights issue, part of a 22.5 billion pound capital raising effort to avoid a state-backed insurance scheme for bad debts.
But many of the more than 500 shareholders gathered on Thursday said they still had mixed feelings about the rights issue -- backed in advance by the UK government -- and over the bank's merger with the crisis-battered HBOS.
"My feeling is we've got to go along with (the rights issue). If we remain in the government scheme, it is even worse," said Ralph Newnes, a shareholder from Birmingham.
Lloyds, which has more retail investors than any other British company after its takeover of HBOS in January, met shareholders just days after the Bank of England said it secretly lent HBOS and Royal Bank of Scotland (RBS.L) almost 62 billion pounds as the financial crisis raged last year.
The news has enraged politicians, who accused Lloyds on Wednesday of selling investors "a lemon."
And it angered small shareholders, many of whom challenged the bank's view that it had disclosed enough facts and did not create a "false market."
Chief Executive Eric Daniels and Chairman Win Bischoff both said the Bank of England had chosen not to disclose the support.
But they declined to say whether Lloyds itself would have been able to reveal the loans received by HBOS, dismissing suggestions that, without being able to provide full clarity for their shareholders, they should have walked away.
Daniels, who has said he has no plans to step down from the helm, said there had been "no mystery" in HBOS's support.
"We gave full disclosure. There was no desire to obscure. The investors had every piece of information necessary to make an informed decision," he told reporters after the meeting.
Lloyds this month said it wanted to sidestep a government insurance scheme for toxic loans and would instead turn to investors to repair a balance sheet badly depleted by HBOS.
"Crucially, with your approval and capital markets support (this opportunity) will allow us to shape our own future," Bischoff told shareholders, adding the rights issue was a more attractive option as Britain's economy begins to stabilize.
Lloyds has 2.8 million small investors and many of those who gathered at Birmingham's NEC arena will already have been tapped for cash in the past 18 months.
Lloyds asked shareholders for 4 billion pounds earlier this year, and beleaguered HBOS scrambled together a separate 4 billion last year in one of the biggest fund-raising flops in UK corporate history.
In addition to the rights issue Lloyds is raising 9 billion pounds from a debt exchange.
The rights issue was priced earlier this week at 37 pence per share, with investors being offered 1.34 shares for every existing share held.
The approval from shareholders removed a final cloud of uncertainty hanging over Lloyds after months of debate over EU competition authorities and toxic loans.
(Additional reporting by Steve Slater in London; Editing by Elaine Hardcastle, Andrew Callus, John Stonestreet)
LONDON (Reuters) –
Debt problems in Dubai struck financial markets hard on Thursday, sinking global stocks, lifting safe-haven bonds and driving the dollar higher.
Gold climbed to a new record high but fell back as the dollar rose. European shares had their worst daily loss in seven months.
Banking stocks came under particular pressure because of potential exposure to any bad debt in the Gulf, as did shares in European car companies, some of which are part-owned by sovereign wealth funds from the region.
Markets were trading without much input from the United States, where it was the Thanksgiving holiday.
Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.
The announcement triggered widespread concern about the once-booming Gulf region's financial health, although some investors differentiated between leveraged Dubai and other more solidly wealthy emirates and countries in the region.
But the worries fed directly into a general nervousness in financial markets about the real state of the world economy at a time when investors are also seeking to lock in 2009 profits.
"The Dubai worries have played a major role in rattling market sentiment at a time when the U.S. is closed and we are not getting anything from anywhere else," said Peter Dixon, economist at Commerzbank.
"It is a day in which market uncertainty has been provoked again."
Others, such as Royal Bank of Scotland, said Dubai's bombshell meant investors would now have to "re-appraise the quality of sovereign support for state-owned entities in the region."
Dubai sought to ease some concerns about international port operator DP World (DPW.DI), saying its debt was not included in the restructuring.
But markets stayed nervous and the cost of insuring debt through credit default swaps around the Gulf rose.
MSCI's emerging market stock index (.MSCIEF) was down 2.1 percent, underperforming the broader all-country world index (.MIWD00000PUS), which was down 1.5 percent.
There were sharp losses in Europe, where the pan-European FTSEurofirst 300 index (.FTEU3) closed down a preliminary 3.2 percent, its biggest daily loss in seven months.
Banks were the biggest drag on the index, but the interlinking of world finance showed up elsewhere.
Shares in London Stock Exchange (LSE.L) fell as traders cited concern that Bourse Dubai held a substantial stake in the company.
"It (the Dubai credit issue) does bring to the fore that much of what we have seen in the markets really has been supported by liquidity," said Georgina Taylor, equity strategist, Legal & General Investment Management.
"It shows how vulnerable the market still is to newsflow," she said. "But it should be seen as a country-specific issue. It's not something systemic. It's about risk appetite."
Within the Gulf, regional bonds sold off and ratings agency Standard & Poor's placed four Dubai-based banks on negative outlook.
"Anything from Dubai or Abu Dhabi is getting absolutely hosed," a bond trader in London said. "There is massive pressure across the board, exacerbated by the thin liquidity."
Gulf markets were closed for Eid holidays.
The dollar gained sharply as investors shed riskier assets in the Dubai debt storm.
But the euro was also hit also when France's Economy Minister Christine Lagarde said that its strength against other currencies was hurting European exporters.
It hovered near the day's low of $1.4960, down 1.1 percent on the day.
The dollar index, a barometer of its performance against six major currencies, rose 0.9 percent on the day, up from a 15-month low.
Risk aversion also lifted the dollar off a 14-year low against the Japanese yen.
Euro zone government bond prices were sharply higher. The yield on two year debt fell 8 basis points.
Bund futures rose so high they broke out of a trading range that has been in place since June.
(Additional reporting by Jamie McGeever, Sujata Rao, Simon Falush, Brian Gorman and Joanne Frearson; Editing by Ruth Pitchford)
NEW YORK (Reuters) –
U.S. shoppers may stretch tight budgets this year to reward loved ones after months of thrift, a softening of heart that store chains hope will erase the holiday season sales debacle of 2008.
Retailers from Wal-Mart Stores to Gap, RadioShack and Walgreens opened their doors on Thursday as U.S. families celebrate Thanksgiving, aiming to capture early bird shoppers a day before the official start of holiday shopping on "Black Friday."
The unsettled state of the U.S. economy, with a 26-year high in unemployment and tighter access to credit, has industry holiday sales forecasts varying from a decline of 3 percent to an increase of 2 percent.
"The consumer is confused. They don't know whether to spend or not," said Marshal Cohen, senior analyst at retail consultant NPD Group.
Carlos Abril was browsing at an Old Navy in Manhattan on Thursday, but said he would not shop nearly as much this year.
"It's tough this year, so we're cutting back," he said. Abril does not plan to spend on himself but would buy gifts for his nephews and other children in his family.
A weak U.S. dollar, however, has been a boon to tourists.
"Stuff is always cheaper here anyway and even more so with the dollar," said Katy Moore, a visitor from Ireland, who was shopping at Foot Locker. She exited the store with a bag and said she would spend quite of bit of money while on vacation.
As the year-end holidays draw closer and deeper discounts beckon, consumers may splurge a bit more. Industry experts expect a strong turnout on the Black Friday weekend, but caution it will not mean a bumper holiday season as shopping trails off in the weeks before Christmas.
"The recession last year was a shock to the consumer. This year they are already tired of it," Cohen said. "They might even reward themselves for being frugal for the whole year."
The psyche of American shoppers is being closely watched, as a return to spending would drive overall U.S. economic growth. Early hopes for a consumer-led recovery have pushed retail shares up 47 percent this year, compared with a 23 percent rise for the Standard & Poor's 500 Index.
Cohen, a 30-year industry veteran, travels to malls all along the U.S. East Coast over the holiday weekend. He now sets out on Thanksgiving Day as so many more stores open on the holiday itself. While traffic to stores on the Thursday is relatively light, people who do make it out are mostly hard-core shoppers and highly likely to buy.
"It's the ultimate conversion factor," he said.
For a graphic on U.S. holiday sales trends, click on (http://graphics.thomsonreuters.com/119/US_RTLXMS1109.gif)
For a Reuters Insider segment on holiday sales, click on(http://link.reuters.com/wuj63g)
MILLIONS TO SHOP, BROWSE
Up to 134 million U.S. consumers say they may shop for holiday gifts this weekend from Black Friday through Sunday, according to the National Retail Federation.
That is up from last year's survey, taken weeks after a global financial crisis erupted, but still below consumer Black Friday plans reported ahead of the shopping season in 2007.
While most research in the last two months showed shoppers planned to spend less or the same in 2009 from a year ago during the holidays, that stance may be softening.
Nearly one-third of consumers surveyed by Deloitte said they now expect to spend more on the holidays than they had planned a month or two ago. Of those shoppers, 86 percent said they would spend more on gifts than previously thought.
The survey, conducted last week, polled 1,051 people with a margin of error of plus or minus 3 percent.
Retailers insist they will stand firm this year and not offer the profit-sapping discounts used to clear merchandise off shelves last year. Cohen estimates that markdowns won't dip below 50 percent off, compared with the multiple discounts of 75 percent and more last year.
While that should help protect margins, it could prove to be a major disappointment to customers.
"With inventories so low, we don't see the same level of promotion as we saw in prior years, which ought not to attract as many customers," said David Berman of hedge fund Durban Capital in New York, which specializes in consumer and retail-related stocks.
Even the Black Friday tradition of midnight madness, in which consumers lined up ahead of store openings in the dead of night, may be waning. Many Walmart stores will be open straight through from Thanksgiving Day after a worker was trampled to death last year, while the nation's biggest chains have already touted huge promotions online for days.
"This year, we are getting Black Friday sales for weeks before Black Friday at Sears, Kmart, Wal-Mart and Best Buy, among others, and have the ability to buy just about every ad online," Credit Suisse analyst Gary Balter wrote in a note lamenting the lost thrill of Black Friday hunting.
"That is going to hurt sales of winter clothing, as we won't have to stand in below-zero temperatures for that sliver of a savings," he said.
(Additional reporting by Phil Wahba and Jennifer Ablan; Editing by Steve Orlofsky)